MIAMI— There’s no denying the many plusses of doing business in the Caribbean—between the surf, sun and sand, plus the close proximity to the United States, relatively low cost of operations and presence of significant international banking centers, what’s not to like?

Very little, at least for employees, according to Charles Engeman, an Ogletree Deakins attorney in St. Thomas, Virgin Islands.

Though the mandates for severance and termination vary among the island territories and nations, employment laws throughout the Caribbean tend to be extremely pro-employee, he told attendees of the firm’s 2009 Workplace Strategies Conference here on May 7.

That doesn’t mean that most Caribbean residents believe that they’re working in some kind of paradise, Christopher Hammon, an Ogletree Deakins attorney in Miami, cautioned. He said that the history of colonization and exploitation in the region is fresh in the memory of many Caribbean residents. Keeping this history in mind might help employers gain not just a better understanding of the reasons for the Caribbean’s distinctive legal environment but also a better understanding of Caribbean employees.

‘Employment for Life Act’

But what about the employees that employers are fed up with trying to understand? There are “financial consequences with any termination” in the region, Engeman remarked. The real question is how much the termination will cost the employer.

Termination can be so costly in the U.S. Virgin Islands that he referred facetiously to its wrongful discharge act as the “employment for life act.” The law states in no uncertain terms nine permissible causes for termination. Only when those causes are present can there be termination without indemnity payments.

Regardless of how egregious the cause for termination, Engeman said, as a practical matter there invariably will have to be severance or redundancy payments and notice requirements to agencies and unions. That’s partly because the reasons that are listed as grounds for termination can be interpreted very narrowly, Engeman told conference attendees. For example, intoxication is grounds for discharge if it interferes with duties. Engeman could easily imagine a drunk night guard arguing successfully that nothing happened during his shift when he was intoxicated so his intoxication did not interfere with the discharge of his duties.

Although Puerto Rico also is a U.S. territory, Engeman indicated that its employment laws are more similar to other territories and countries in the Caribbean than most of the United States, referring to its legal climate as “California plus.” Puerto Rico Law 80, for example, requires indemnity payments for the discharge of permanent employees, though employers can avoid payment for reductions in force if they follow seniority or for new employees on probation. The required indemnity is on a sliding scale up to six months.

Redundancy payments on a sliding scale also are required in Trinidad & Tobago, as well as the Bahamas, which requires up to one month’s notice or pay instead of notice, plus one month’s pay per year of service capped at 48 weeks. Engeman cautioned that the notice requirements differ in some parts of the Caribbean, such as in the Bahamas, depending on whether employees are hourly workers or managers.

In the Caribbean, pay often is defined as the highest amount of pay an employee ever has received for one year, he stated. Salary and commissions might even be lumped together. And in Puerto Rico, he added, enforcement authorities won’t permit employers to withhold amounts for federal taxes from indemnity payments, but instead require employers to gross up and pay the indemnity payments plus the taxes on the payments.

Employment Contracts

The bottom line is that the employment relationship is much different in the Caribbean than in the United States. It effectively is an employment contract, and any change to that contract cannot be made without employees’ consent, he cautioned. So, if an employer based in the United States adopts a new policy and wants it rolled out uniformly across the organization, that’s likely to cause problems in the Caribbean.

Suppose a company changes its commission policy and, as a result, its sales force suddenly rake in $600,000 a year instead of $60,000. If the employer decides that the change in the commission policy was a mistake and wants to change it again, the employer must get employees’ consent or risk their arguing that they have been terminated without cause and seeking severance payments calculated on the basis of their highest salary. The employee-friendly legal environment can result in employees deciding, at least in good economic times, to reject changes to any terms and conditions of their employment and seek jobs elsewhere while they receive severance payments.

Respect Training

Because of the contractual arrangement between employers and employees in the region, employers should give particularly careful thought to what is included in the orientation for employees, since it is so much harder to negotiate changes in policies in the Caribbean than it is for most businesses to make changes in the United States.

Hammon urged attendees to provide training on companies’ respect and nondiscrimination policies in the orientation for foreign employees, even though Title VII and other EEO laws do not apply to citizens of other countries who aren’t working in the United States. Here’s why: Title VII and other EEO violations otherwise can crop up easily among employees who are covered by the laws. That’s not only because Title VII and many other EEO laws apply to U.S. employees working abroad, but also because U.S. employees covered by EEO laws increasingly report to foreign employees. Moreover, as the economy continues to become more global, more U.S. employees inevitably will cross paths with more foreign employees, whether in person at business conferences or virtually in videoconferences or teleconferences.

Foreign managers need to know up front that respect and anti-discrimination policies are a part of their terms and conditions of employment, Hammon said. Employers that are sensitive to cultural differences will be that much farther ahead of competitors in reducing their potential legal exposure.

To illustrate, Hammon recalled a sexual harassment case in Puerto Rico where a female salesperson claimed that her supervisor was constantly referring to her with pet nicknames like “pretty eyes” and kissing and touching her. When Hammon interviewed the alleged harasser, he said the grounds for the claim were baseless. But he didn’t deny the allegations. Instead, when he heard them described, he said, “Exactly. No harassment!” This “well-educated, high-performing executive was not able to understand” how his behavior, which he believed firmly reflected cultural norms, could be unlawful harassment, Hammon said.

But be careful, Hammon cautioned: Employers can’t spring these policies on foreign workers in the Caribbean without risking running afoul of their employment contracts. Instead, he recommended that employers “work it into the original contract.”